Amazon will pay more than $61.7 million to settle Federal Trade Commission charges that it withheld tips from Amazon Flex drivers over 2 1/2 years, the federal agency announced Tuesday.
Between late 2016 and August 2019, the FTC’s complaint alleged, Amazon claimed that every penny customers tipped for deliveries of goods and groceries went to Flex drivers, who operate as independent contractors delivering for the company’s Prime Now, Amazon Fresh and Whole Foods services in their personal vehicles.
“Rather than passing along 100% of customers’ tips to drivers, as it had promised to do, Amazon used the money itself,” said Daniel Kaufman, acting director of the FTC’s Bureau of Consumer Protection, in a statement. Without telling Flex drivers, Amazon had lowered their hourly base rates in 2016 and was using customer tips to make up the difference between the new, lower rates and previous rates, which ranged from $18 to $25 an hour.
The effect of the change was to reduce Flex drivers’ pay. Hundreds of drivers complained to the company that they were not receiving their tips, writing that they “felt cheated,” according to the FTC’s complaint.
Following negative media coverage, Amazon disclosed the rate change to drivers in August 2019 and pledged to give drivers a breakdown of how much of their pay comes from tips.
The settlement payment represents the full amount of withheld tips and will be used to compensate drivers, according to the FTC.
Amazon does not believe “that the historical way we reported pay to drivers was unclear,” a spokesperson said in a statement. Nevertheless, the company “added additional clarity in 2019” and “is pleased to put this matter behind us.”
Issues around Flex driver tips persisted after 2019, however. On multiple occasions last year, Flex drivers reported that Amazon had delayed paying them tips or that their tips had vanished. At the time, Amazon said technical difficulties were to blame.